The Republican Assembly members put forth a logical plan to
close the budget deficit this year with no increased taxes. Whether the plan
can get past political hurdles is another matter. But, the plan deserves due
consideration.
Chief among the criticisms of the plan are three points. 1)
Too much reliance on new, unanticipated revenue; 2) Cuts in the government
costs of 10-percent; 3) Seeking a vote of the people to move revenues from
ballot initiative-created early childhood education and mental health programs
when a similar effort was rejected by voters two years ago.
Taking the critiques one at a time, the first issue is
probably the most difficult because it relies on a bit of the unknown. The
state certainly has new revenue in the bank that wasn’t expected when the
governor presented his budget last January. The new revenue amounts to about
$2.5 billion. Republicans are projecting another $2.5 billion above anticipated
revenues will be available in the next fiscal year.
No one can be sure of that, but there are positive signs. In
fact, with a bit of luck, the $2.5 billion the Republicans hope to see may be a
conservative number. We know that the governor forecasted less money would come
in to the state this May and June than last May and June but revenues are
actually ahead of last year by 13-percent at this point. In addition, estimated
tax payments, mostly from small business owners, investors and the
self-employed, are ahead 20-percent from last year. The Republican projection on new revenue
appears on solid ground.
Clearly, public employees will fight the Republican plan to
cut costs 10-percent. However, is it unreasonable to ask the public sector to
share the same burden facing the private sector suffering cutbacks and a
12-percent unemployment rate? The Republicans propose getting at the 10-percent
cost cutting figure with some layoffs; pay cuts where legally possible, and
requiring employees to pay more for health benefits. It should be noted that
there are roughly 12,000 equivalent new employees working for the state than
two years ago despite the recession.
Finally, there is pushback against the Republican proposal
to shift funds out of the Proposition 10 early education kitty funded by
cigarette taxes and the Proposition 63 mental health deposit funded by high-end
income taxpayers.
The Republicans are being admonished for seeking a vote on
these issues even though the voters turned down similar proposals two years
ago. Further, Democrats are calling Republicans hypocrites because Republicans screamed
against putting the tax extension measure on the ballot that the voters also
rejected two years ago, claiming the voters had spoken.
Republicans point out that changing the initiatives require
a vote of the people whether that effort was two years ago or now. In the 2009
special election, the tax extensions did not have to go to the voters. But the
main difference between now and then is a political one.
Voters were dead set against the tax increases in 2009 and
the changes to Props 10 and 63 very well could have been victims of the
backlash against the tax measures. This time around, by passing the amendments
to Props 10 and 63 and moving money to the general fund, the voters would be supporting
an effort to prevent tax increases.
The Republican plan is not perfect and will not have an easy
time in the legislature controlled by Democrats. However, it does show that the
budget can be balanced without taxes.
Expect the Democrats to continue pushing a temporary tax
plan. However, as Assembly Republican leader Connie Conway rightly asks about
the governor’s five-year tax extension proposal on top of the two years the
taxes have already been in place, what is temporary about a tax plan that goes
on for seven years?